Hennessy v. Schmidt

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Citation583 F.2d 302
Docket NumberNo. 77-1192,77-1192
PartiesJohn H. HENNESSY, Jr., as an Individual and d/b/a Business Systems and Service Company, a Proprietorship, Plaintiff-Appellee, v. Otis A. SCHMIDT, Defendant-Appellant.
Decision Date26 July 1978

Edward J. Kelly, Chicago, Ill., for defendant-appellant.

William Freivogel, Chicago, Ill., for plaintiff-appellee.

Before CUMMINGS, SPRECHER and WOOD, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

For the second time we are presented with an appeal in this case in which Hennessy seeks to recover damages for the alleged breach of a sales contract whereby he was to procure a purchaser for the corporate stock in S-R Industries owned by Schmidt. Following a bench trial, judgment was entered for Schmidt, and Hennessy appealed. Our earlier decision, 521 F.2d 1282 (7th Cir. 1975), vacated the judgment and remanded the case for "further proceedings," this court having determined that the district court instead of applying the appropriate "preponderance of the evidence" standard, had erroneously applied a "conclusive proof" standard to the evidence. In addition this court noted that the district court had applied the improper test (the "broker's fee" test) for determining whether Hennessy's activities were the proximate cause of the sale of Schmidt's shares, and that on remand Hennessy was entitled to have "the evidence in the case weighed and determined under the appropriate standard and test" (the "finder's or business opportunity broker's fee" test). On remand, judgment was entered in favor of Hennessy, and Schmidt appeals.

I.

A preliminary jurisdictional question must be resolved before we are able to address the merits. The notice of appeal filed by Schmidt on January 14, 1977, states he is appealing "from the Order of the District Judge of January 6, 1977, denying defendant's motion for a new trial, to vacate judgment, and for a re-hearing." This court, Sua sponte, raised the issue of its jurisdiction, because of our decision in Bass v. Baltimore & Ohio Terminal R. R., 142 F.2d 779, 780-81 (7th Cir. 1944). In Bass this court held, "Motions to vacate orders, motions for rehearings or for new trials, and like motions are addressed to the discretion of the trial court and are intended to call its attention to errors allegedly committed by it and to afford an oportunity (sic) for their correction. Orders granting or denying such motions are not appealable."

Initially, appellant Schmidt argues that his motion for a new trial serves a different function than that ordinarily contemplated by Fed.R.Civ.P. 59, a post-judgment motion directed to the trial court's discretion seeking correction of errors before appeal. Schmidt argues that his request for a "new trial" was not a matter within the discretion of the lower court, since it was what this court implicitly ordered in its remand order, and thus his situation falls within the rule set forth in Mercer v. Theroit, 316 F.2d 635, 638 (5th Cir. 1963), Rev'd on other grounds, 377 U.S. 152, 84 S.Ct. 1157, 12 L.Ed.2d 206 (1966). In Mercer the court of appeals had remanded the case to the district court with directions to enter judgment for the defendant unless the plaintiff could present evidence which would justify a new trial. When plaintiff's subsequent motion for a new trial was denied, the court of appeals held that its remand order had contained an "invitation" to plaintiff to make such a motion, and the denial by the district court was a final decision that the plaintiff had failed to meet the terms of the mandate and that, as such, the denial of the motion was "appealable."

We do not view the circumstances of this case to be within the Mercer rule. First, we do not view the mandate of this court directing "further proceedings" as containing an "invitation" for Schmidt to make a motion for a new trial. Further, we find that the substance of the relief sought in the post-judgment motion 1 in this case was exactly that which is ordinarily contemplated to be within a Rule 59 motion. Defendant not only argued to the court that it had erred in entering judgment without taking additional testimony, but also that the court had incorrectly computed the measure of damages and was in error in granting Hennessy pre-judgment interest. 2 It is clear to this court that the motion filed in this case was a Rule 59 motion, a post-judgment motion directed to the discretion of the trial court for correction of errors and thus is not normally an Appealable order. 3

Alternatively, Schmidt urges that if this court interprets his motion to be a Rule 59 motion that his notice of appeal be construed as being from the judgment. In order to do so, it is necessary for this court to determine whether the time has come to overrule our decision in Bass, and adopt the "clear-intent-of-the-appellant" rationale now prevailing in all the appellate courts that have addressed the issue.

In the Bass decision this court held that it had no jurisdiction over an appeal from the denial of a motion for a new trial, indicating that it felt constrained to reach this result because of the principles enunciated by both the Supreme Court and the other courts of appeal. 142 F.2d at 781. However, the result in Bass is no longer mandated or even in accord with the precedent or principles enunciated by any other appellate court. 4 The Seventh Circuit now stands alone in retaining its harsh, technical application of the rule in contrast to the Supreme Court, which has more recently advocated a "common sense" approach to the rules. Bankers Trust Co. v. Mallis, 435 U.S. 381, 98 S.Ct. 1117, 55 L.Ed.2d 357 (1978). Also in Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962), the Court observed that the rules reject the notion that one procedural mistake may preclude a proper decision on the merits, and indicated that the rules are to be construed so as to "secure the just . . . determination of every action." Id. at 181, 83 S.Ct. at 230. In the Foman case, the Court of Appeals for the First Circuit had ruled that it did not have jurisdiction to review an appeal from a district court's denial of a motion to vacate and amend judgment. The Supreme Court held that the appeal from the denial of that motion "although inept" should have been treated as an appeal from the judgment itself, noting that this was the party's intent and that there was no prejudice to the respondent, since both parties attempted to argue the merits of the judgment on appeal.

The general practice now followed in the appellate courts, when an appeal is mistakenly taken from the order denying the motion for a new trial when it should have been from the judgment, is to "regard the error as harmless and treat the appeal as taken from the judgment." 6A Moore's Federal Practice, P 59.15(1). 5 We now overrule our decision in Bass 6 and adopt the general rule as stated above, subject to the following qualifications: the judgment from which the appellant intended to appeal must be final; it must be clear what judgment is involved; the motion and appeal must have been timely made; and there must be no prejudice to the other party. See Moore, Supra.

Having examined the circumstances of the appeal here, we find that the appellant was seeking review of the judgment of the district court, including review of the issue of whether a "new trial" was required on remand, but that he mistakenly appealed from the motion for a new trial rather than from the judgment itself. We conclude, therefore, that the "clear-intent-of-the-appellant" was to appeal from the judgment, that the judgment is final, that it is clear which judgment is involved, appeal was timely made, and there is no prejudice to the respondent, since both parties attempted to argue the merits on appeal. Accordingly, we construe the appeal here as being an appeal from the judgment.

II.

Reaching the merits of the appeal, we affirm the judgment of the district court.

The district court after an examination of the entire trial record found that "(t)he proximate cause (of the sale) was Hennessy's basic proposal worked out after conversations with both Ruck and Schmidt and formalized in Kelly's correspondence, which in turn was based on Hennessy drafts." It further concluded:

Applying the "finder's or business opportunity broker's fee test" which the Seventh Circuit found to be the proper one, we conclude that the plaintiff is entitled to the 5% Fee provided by the agreement between himself and Schmidt. As in Diversification Consultants, Inc., (130 Ill.App.2d 1029, 264 N.E.2d 788 (1st Dist. 1970)), it was plaintiff's basic proposal, though slightly modified in final negotiations, which the parties adopted in consummating the sale. He provided the formula and stipulated reopening of the discussions which culminated in the December 27 closing. His inactivity in the final stages of the negotiations was not his choice but that of Schmidt's agent, Kelly. Hennessy's role here was substantially greater than has been held to entitle a broker to a fee in other cases. See Schaller v. Litton Industries, Inc., (307 F.Supp. 126 (E.D.Wis.1969)) and Chiagouris v. Continental Trailways, 50 Ill.App.2d 196, 200 N.E.2d 399 (1st Dist. 1964).

Appellant Schmidt argues that it was improper for the district court to enter judgment based only on the record and evidence taken at the original bench trial. His position is that the mandate of this court for "further proceedings" required that additional testimony be taken before judgment was entered. We disagree. When this case was previously before this court on appeal, there was no challenge to the credibility, integrity or competence of any of the witnesses nor was there a challenge to any of the...

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